QUESTION 2

1.The Dividend Growth Model is used to:

Estimate the current market price of stock which is likely to receive dividends in the future.

Estimate the required rate of return on stock if we know the current price, dividend and projected growth rate

Estimate therequired growth rate on stock if we know the current price, the required return, and the projected dividend

All of the above

QUESTION 3

1.The majority of publicly traded firms in the United Statespay regular cash dividends.

True

False

QUESTION 4

1.The Dividend Growth Model (DGM) assumes there is ONLY ONE stream of inflows relevant to the value of share of stock.

True

False

QUESTION 5

1.A ZERO COUPON BOND provides holders with ONLY ONE cash flow at maturity AND cannot be sold for greater than its par (face) value.

True

False

1 points

QUESTION 6

1.The COUPON PAYMENT rate on a corporate bond is used to calculate the Bond's CURRENT YIELD.

True

False

1 points

QUESTION 7

1.The current value of both Bonds and Stock reflects the present value of the future cash flows which the security is expected to generate.

True

False

1 points

QUESTION 8

1.A bond which is convertible to a certain number of shares of common stock at a pre-determined cost should carry a LOWER interest rate than an otherwise identical bond without a conversion privilege IF the bondholder believes there is a reasonable likelihood that the company's stock will sell at a price HIGHER than the conversion price during the period that the conversion privilege can be exercised.

True

False

1 points

QUESTION 9

1.Preferred Stock differs from common stock in that it normally has a fixed dividend rate, and its dividends must be paid in full before any dividends are paid to common stockholders. Preferred stockholders also are generally paid before common stockholders in the event the company is liquidated.

True

False

1 points

QUESTION 10

1.In the context of the Dividend Growth Model, the growth rate of dividends and the growth rate of the price of the company's stock are usually different.

True

False